Sale of Dearborn hotel could be economic driver for region, mayor says

The 772-room former Hyatt Regency is the second-largest in Michigan, behind the Detroit Marriott in the Renaissance Center.

The new ownership of the Edward Village Michigan hotel, better known as the former Dearborn Hyatt Regency, is good news for the city, Mayor Jack O’Reilly Jr. said.

In fact, it’s something he views as an economic driver for the whole region.

Royal Realties LLC, the Israel-based investors group that owned the hotel and convention center since 2011, sold it last week to an undisclosed, offshore ownership group that holds properties in Toronto.

Royal purchased the hotel four years ago after the original owner, Ashford Hospitality Trust Inc., defaulted on its loan on the property. One of Royal’s members said it paid $15.5 million for it. But O’Reilly said legal proceedings tied to unpaid property taxes that were later resolved showed Royal paid $10 million for the hotel and convention center.

The amount the new owners paid for the property has not been disclosed. New York broker Savills Studley’s U.S. Capital Markets – Hotel Group, which represented Royal in the sale, declined to disclose any details, citing a confidentiality agreement.

Last week’s sale of the property comes following several changes in the brand and operator for the property over the past few years, a breach of contract lawsuit with one of the operators that was later settled out of court and a near-foreclosure of the property for nonpayment of property taxes before they were finally paid.

Watching the 772-room hotel struggle since Hyatt, its original operator, departed in 2012 has been “frustrating,” O’Reilly said.

Hyatt wanted to stay to continue its management of Michigan’s second largest hotel, he said. The Chicago-based brand negotiated for a long time with Royal, making it clear it was looking for about $25 million in upgrades to the hotel and convention center from Royal in order to extend the franchise agreement for another 20 years, O’Reilly said. When the two couldn’t come to agreement over the needed investments, Hyatt pulled out.

As Royal negotiated to bring other prominent flags to the property, those brands contacted the city as part of their due diligence, O’Reilly said. “We talked to all kinds of flags that were very interested in entering into an operating agreement ... (but) (Royal representatives) just simply weren’t prepared to put any money into the property,” he said.

As I reported Monday, the new ownership group is reportedly interested in making the needed investments to bring the property back to its four-star status, according to Michael O’Callaghan, executive vice president and COO of the Detroit Metro Convention & Visitors Bureau.

“Any change would be welcome,” O’Reilly said.

Currently, the hotel “is not operating at a level that is attracting the kind of customer base they need,” he said. “They haven’t invested for their customers in things that make them happy, so they’re discounting everything.”

While discounting may attract customers in the near term, it’s not a sustainable proposition, O’Reilly said.

Investments could help bring events that used to take place there back to the hotel and convention center, he said, noting that would be good for the city and the region. They could also give new life to a regional convention center plan O’Reilly and the city of Dearborn developed between 2008 and 2010, with input from the Detroit Metro Convention & Visitors Bureau.

Before shelving the project after Hyatt departed, the city was considering the development of a $28 million regional convention center adjacent to the former Hyatt. The site was to have provided meeting space for 1,800-2,000 attendees, helping to attract new regional and national conferences to the city and region, O’Reilly said.

“There’s nothing like that right now in the region; it wouldn’t have competed with any other local venues,” he said.

If the new owner of the Edward Village Michigan hotel can get it back to a four-star property, the city would have “the anchor we need” for the regional convention center, O’Reilly said.